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Friday, March 25, 2005

Five implications of the YHOO vs GOOG email war

Yahoo (ticker: YHOO) upgraded the storage capacity of its free web email accounts to 1 GB, equal Google's (ticker: GOOG) Gmail. Five implications:

1. Web email is strategically important to the internet leaders:

  • it's sticky (people don't like changing email addresses and moving address books);
  • it generates tons of page views, and thus advertising opportunities;
  • it's an integral part of the next-generation personal communication/publishing bundle.

2. Email is at the core of Yahoo's strategy:

  • Yahoo 360, Yahoo's next gen comms/pub bundle, depends on users keeping their address books with Yahoo. Not just for email, but also for instant messenging and blogs with permission-based and invitation-only access.
  • Google was first to roll-out contextual ads on web email; but Yahoo is also focused on increasing its ad inventory, and knows that it can do better advertising on email.

3. Google turned up the heat on Yahoo:

  • Gmail improved on Yahoo mail: it offered more storage, faster auto-address completion, better grouping of emails (by conversation), and better search.
  • Was Yahoo losing web email users? Anecdotal evidence: more email to The Internet Stock Blog is from Gmail addresses than Yahoo addresses.
  • Google's contextual advertising on Gmail is more effective than Yahoo's ads on Yahoo mail. More anecdotal evidence (you'll enjoy this one): My 12 year old niece has a Yahoo web email account, registered as an account for a minor, which nonetheless exposes her to ads for Yahoo adult personals and dating services. My brother (her dad) emails Yahoo and says "Why are you doing this? I don't want my 12 year old daughter to join an adult dating site and start getting contacted by, well, you know." Yahoo responds: "we have no control over those ads." Think about that.

4. Where's MSN and AOL?

  • Microsoft (ticker: MSFT) will be forced to upgrade Hotmail's current 250 MB to 1 GB to compete.
  • MSN is serious about this market: if it's rolled out a blogging platform, it cares about email.
  • AOL (owned by Time Warner, ticker: TWX) needs to move fast to get its users moved over to free, sticky applications. It's becoming more and more tempting to dump that AOL email address when the free web offerings are getting better and better.

5. Financial impact on YHOO?

  • Terry Semel has argued to investors that Yahoo is less reliant on Internet ads than Google as it has diversified revenue streams, including premium services. But who's going to pay for "premium web email" when Yahoo will be constantly forced to improve its free service due to competition with Google? Looks like advertising and stickiness are Yahoo's future rather than paid services.
  • All web email services are now susceptible to use as free storage. "Want to backup your files on multiple servers? Email them to web email accounts with Yahoo, Google and MSN. Free, and lots of redundancy. Just make sure anything confidential is encrypted." Not clear at what point providing free storage starts to cost GOOG and YHOO real money.

YHOO chart below.

Posted by David Jackson on March 25, 2005 at 01:07 AM in Sub-sector: Services, ticker: GOOG, ticker: MSFT, ticker: TWX, ticker: YHOO | Permalink


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» Implications of Yahoo & Google oneupsmanship from How Not To Blog
This article from the Internet Stock Blog talks about the back and forth competitve environment for email and other services between Yahoo and Google. It also mentions MSN's role in the arena. Some interesting tidbits in there. [Read More]

Tracked on April 3, 2005 11:35 AM


Feature 4umail.net Gmail Yahoo Dubmail.net
Size of inbox 4GB 2158MB 1GB 250MB
Send Limit Per Day Messages 500 100 30 15
Send Limit Per Day 500MB 150MB 30MB 75MB
Max Message Size 150MB 10MB 10MB 5MB
Auto-Responder YES NO NO YES
Auto-Forward YES NO YES YES
Inactivity Exp. NO YES YES YES

Posted by: Viktor Takacs | June 2, 2005 08:29 AM

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